Investing in large-cap mutual funds requires collecting capital, learning about the unique risks and benefits of the bigger “large-cap” stocks, and finding the appropriate mutual funds for diversified investment in some of the biggest names traded on Wall Street. Investors who want to get into large-cap mutual funds can do so through any brokerage firm or account that offers access to fund options for publicly traded stocks. In the process, these new traders should focus on some of the best advice for choosing and acquiring large-cap mutual funds.
The stock of a company that has a total market capitalization of over 10 billion dollars is called a large-cap stock. The market capitalization for a firm is the total shares outstanding, multiplied by the share price. Although this is the technical definition, some mutual fund managers and other financial firms or professionals value large–cap or big-cap stocks a little differently. Generally, a large-cap stock represents a company that dominates its part of a sector or industry. Large cap stocks tend to be seen as “value stocks,” or stocks that have established high worth, rather than “growth stocks” that still have a long way to go to secure themselves in the greater market and in the public consumer interest.
Large-cap mutual funds take a bundle of large-cap stocks, and make them into one single financial product. One of the benefits of these mutual funds is diversification. An investor who buys into a large-cap mutual fund is putting his or her money into a collection of established, valuable companies. As a result, if one of the companies suddenly loses value, the large-cap mutual fund investor will be less vulnerable to some of those big losses than if he or she held only that single large-cap stock.
To invest in large-cap mutual funds, investors should secure access to these funds from their brokerage. They should also read through the prospectus of the mutual fund, not only to see what investment in this fund will cost them, but to see what underlying stocks are part of the “mutual fund basket,” and to try to get a picture of the strategies that mutual fund managers will use to generate yields over time. Investors should also look at the potential tax burden of a large-cap mutual fund in relation to their individual tax filing status and income tax situation. It’s important to realize that in general, large-cap stocks are expensive, since their share prices have risen a lot over time.